Highlights:

• Reported diluted earnings per share of $0.79 versus $0.80 in 2008, including the items detailed on Schedules 4 and 13
• Excluding currency, reported diluted earnings per share up 22.5%
• Adjusted diluted earnings per share of $0.83 versus $0.87 in 2008, including the items detailed on Schedule 12
• Excluding currency, adjusted diluted earnings per share up 17.2%
• Increases its forecast for 2009 full-year reported diluted earnings per share to a range of $3.10 to $3.20, from $2.85 to $3.00, which includes the Colombian Investment and Cooperation Agreement charge of $0.04 per share. Excluding currency, diluted earnings per share are projected to increase by approximately 10%-13%
• Declared a regular quarterly dividend of $0.54 during the quarter
• Spent a total of $1.4 billion to repurchase 34.7 million shares of its common stock in the quarter
• Announced agreements to purchase the South African affiliate of Swedish Match for ZAR 1.75 billion (approximately $222 million) and the Colombian cigarette manufacturer, Productora Tabacalera de Colombia, Protabaco Ltda. for $452 million

NEW YORK, July 23, 2009 – Philip Morris International Inc. (NYSE / Euronext Paris: PM) today announced diluted earnings per share of $0.79 in the second quarter of 2009, down 1.3% from $0.80 in the second quarter of 2008, including the items detailed on the attached Schedules 4 and 13. Excluding currency, reported diluted earnings per share were up 22.5%. Adjusted diluted earnings per share were $0.83, down 4.6% from 2008 adjusted earnings per share of $0.87, including the items detailed on the attached Schedule 12.

“Adverse currency again weighed on our results, but our underlying performance continued to be robust despite the challenging economic environment,” said Louis Camilleri, Chairman and Chief Executive Officer.

“Indeed, on a currency neutral basis, net revenues, operating companies income and adjusted diluted earnings per share were up 8.8%, 14.9% and 17.2%, respectively. While our volume performance principally reflected consumption declines in numerous markets, share performance was strong driven by our focus on innovation. Of particular note was the improvement in our financial performance in the EU Region versus the recent past.”

2009 Full-Year Forecast

PMI increases its forecast for 2009 full-year reported diluted earnings per share to a range of $3.10 to $3.20, from $2.85 to $3.00, which includes, at current exchange rates, an unfavorable currency impact of $0.55 per share compared to $0.80 per share in the February 2009 forecast. Excluding currency, diluted earnings per share are projected to increase by approximately 10%-13%. This guidance includes a pre-tax charge of $135 million ($93 million after-tax), equivalent to $0.04 per share, relating to the Colombian Investment and Cooperation Agreement announced during the quarter, and excludes the impact of any potential future acquisitions, asset impairment and exit cost charges, and any unusual events.

Dividends and Share Repurchase Program

PMI declared a regular quarterly dividend of $0.54 during the second quarter of 2009, which represents an annualized rate of $2.16 per common share.

During the second quarter, PMI spent $1.4 billion to repurchase 34.7 million shares of its common stock. Since May 2008, when PMI began its previously-announced $13 billion, two-year share repurchase program, the company has spent a total of $8.1 billion to repurchase 178.1 million shares.

Acquisitions and Agreements

On July 2, 2009, PMI announced it had entered into an agreement to acquire Swedish Match South Africa (Proprietary) Limited (SMSA) for ZAR 1.75 billion (approximately $222 million). The transaction is subject to South African regulatory approval and is expected to be completed by the end of the year. It is anticipated that the acquisition will be immediately marginally accretive to PMI’s earnings per share.

On July 10, 2009, PMI announced an agreement to purchase the Colombian cigarette manufacturer, Productora Tabacalera de Colombia, Protabaco Ltda. (Protabaco) for $452 million. The transaction is subject to competition authority approval and final confirmatory due diligence and is expected to close within six months of the announcement. The acquisition is projected to be immediately marginally accretive to PMI’s earnings per share.

As we have said here before I am using PM as a dollar devaluation play also for reasons stated here. This is a pretty simple investment. We all know the economics of tobacco are unbelievable. We also know that PM has a first class management team. So the only thing really getting in the way of continued long term gains are governments trying to get a piece of the pie. Other than that, it should be pretty clear sailing…

PM Q2 2009

Disclosure (“none” means no position):Lomg PM

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